Cross-Border Deposits and Monetary Aggregates in the Transition to EMU
IMF Working Papers, November 1, 1991
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- Cross-Border Deposits and Monetary Aggregates in the Transition to EMU
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Bibliographic details
- Authors: Ignazio Angeloni, Aviram Levy, Carlo Cottarelli
- Published: November 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451853742.001
Summary and research question
- Examines the effect of cross-border deposits (CBDs) on the stability of the relation between monetary aggregates and nominal GDP in the five largest EC countries.
- Develops analysis in terms of the “information content” of alternative money definitions (including or excluding selected subsets of CBDs).
- Uses a multicountry simultaneous system of money demand equations to derive measures of information content.
Key findings
- In the most recent period covered by the study, traditional money aggregates have lost information value.
- Alternative money definitions that include CBDs dominate traditional aggregates in information content.
- Two alternative bases for money definitions that improve information content are:
- Definitions based on the residency of the holder.
- Definitions based on the currency of denomination.
Methodology and scope
- Empirical framework: multicountry simultaneous system of money demand equations.
- Geographic focus: the five largest EC countries.
- Conceptual focus: alternative money definitions that include or exclude selected subsets of cross-border deposits.
Implications for monetary statistics and policy
- Monetary aggregates used for policy and analysis may need redefinition to incorporate cross-border deposit positions.
- Definitions that consider residency of holder or currency of denomination can restore or improve the information content of monetary aggregates relative to nominal GDP.
- Monitoring and classification of CBDs is important for preserving the stability of money–income relationships during the transition to EMU.
Subject coverage and keywords
- Subjects: Currencies, Demand for money, Monetary aggregates, Monetary base, Money, National accounts, Personal income.
- Keywords appearing in the source: aggregate broad money money stock, correlation coefficient, Currencies, Demand for money, Europe, foreign currency, income equation, Monetary aggregates, Monetary base, monetary policy, money demand, money stock statistic, narrow money definition, Personal income, standard error, stock definition, WP.
Cross-Border Deposits and Monetary Aggregates in the Transition to EMU — IMF Working Paper